Can I Leave the House to my Children and not my Spouse? (Part 2)

                Last week I was telling you about Sara, who called about her Mom.  Dad left the house to Sara and her sisters but because of something called the elective share, I told Sara that the house may not be entirely protected when it is time to file for Medicaid benefits.

                Here’s how it works.  The elective share is a law that protects an unsuspecting surviving spouse from being cut out of the will, only to find this out upon the predeceasing spouse’s death.  In New Jersey, unless the surviving spouse knowingly waives this right, he/she is entitled to 1/3 of the deceased spouse’s estate less what he/she already has in his/her own estate.

                Let’s say, for example that husband dies leaving an estate of $600,000.  1/3 of his estate equates to $200,000.   If wife already has $200,000 or more as part of her own assets, she doesn’t receive anything from his estate.  If she has $100,000 then she receives another $100,000 from him.  If she has nothing, then she receives $200,000.

                So, what has this anything to do with Medicaid?  Because if the wife doesn’t assert her right to the elective share, Medicaid says, in effect, that she has given that money away, causing a Medicaid penalty.  She had a legal right to that money which she chose not to assert.

                Let’s go back to Sara’s situation.  What we have to do is value the house and the other assets that Dad had at the time of his death.  We also have to value the assets that Mom had at that same time.  If 1/3 of Dad’s estate is less than what Mom already had at that time, then she only has to spend down the remaining $20,000 Mom has in order to qualify for Medicaid.

On the other hand, if 1/3 of Dad’s estate is of a value greater than Mom’s entire estate at the time of Dad’s death, then part of the value of the house will need to be spent down before New Jersey Medicaid eligibility can be achieved.  I told Sara that, in that case, she would either need to sell the home or get the cash from some other source.

She told me that it wouldn’t be easy to get the records of Dad’s estate assets because her sister was the executor and didn’t keep great records.  I explained that it was definitely doable and if she can get me that information I can tell her exactly when and how Mom could qualify for Medicaid.